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We all know that economic conditions have been tough lately and revenues have been dropping. Our governments have not been exempted from experiencing shortfalls in revenues either. When this happens, governments typically either raise taxes and/or increase enforcement of current tax laws. Sales and Use Taxes are often an easy target. Businesses are wise to ensure that they adhere to all Sales and Use Tax laws. This article explores procedures that will help companies using Infor ERP FACTS to calculate and record these taxes.
Use Tax Processing through Accounts Payable
Generally, Use Tax is reported and paid on the same return that Sales Tax is reported and paid.
G/L Accounts
Set up a separate Use Tax Payable G/L account for each jurisdiction that you are required to report/remit Use Tax amounts. This should be separate from the Sales Tax Payable Account to facilitate reconciliation of the Sales Tax Report Totals to the G/L Control Account.
Document Entry
 Determine if Use Tax should be calculated. You should consult with your company’s tax accountant, attorney or advisor to determine what kinds of items or services are subject to Use Tax in your area. That adviser will also need to advise you as to the tax rate that should be applied.
1. Determine the amount of Use tax to be recorded when recording an A/P Document in A/P Document Entry.
2. Enter the actual amount to be paid to your vendor. Charge the appropriate G/L Account(s) as you would normally.
3. In the G/L distribution add 2 lines:
a. Reenter the G/L Account that was charged above. Enter the amount of Use Tax as a positive number.
b. Enter the appropriate Use Tax Payable G/L Account. Enter the amount of Use Tax as a negative number.
The A/P document, when updated will record the amount due the vendor, increase the expense account for the total of the direct expense of the item or service plus the Use Tax Amount and record the liability for the Use Tax.
A/P Non-Invoice Check Entry (*requires a small modification)
 This is very similar to A/P Document Entry, except that 3 invoices are required: 1 for the amount to be paid, 1 for the positive amount of Use Tax and 1 for the negative amount of Use Tax amount. (The modification allows you to enter the negative invoice amount with no discount into FACTS.) Care must be taken to ensure that no duplicate A/P Document Numbers for each vendor are created.
End of Period
The amount to be paid should normally be the liability account balance as of the end of the prior month. The purchase amount can be imputed by dividing the liability amount by the tax rate, e.g. $6.00/6%=$100.00.
Sales Tax
Tax Code setup and liability accounts
Set up a separate Sales Tax Payable G/L account for each jurisdiction that you are required to report/remit Sales Tax amounts. This should be separate from the Use Tax Payable Account to facilitate checking/reconciliation of the Sales Tax Report Totals to the G/L Control Account.
Set up a separate Sales Tax Code in A/R File Maintenances for each jurisdiction that you are required to report/remit Sales Tax amounts.
Base Report, payment amount and EOP procedures
Invoices updated from Sales Registers appear on the Sales Tax Register which is on the A/R End of Period menu. Proper procedures for this register may not be to run the register, first to last tax codes, first to last date, all branches and then remove the records just printed. The proper procedure should be run the register for whatever tax codes are to be remitted; if they are not contiguous then several registers may need to be run. Use Report Templates to set up ranges of tax codes if necessary. Dates should be first day of the reporting period through last day of reporting period. Remove records once you have the printed register in hand or archived. Verify/reconcile the balance in then G/L liability account as of the last day of the reporting period with the total on the report. Make any necessary adjustments via G/L Journal Entry. The amount paid in any subsequent period should be the ending balance from the prior period.
Adjustments
 In order to properly record Sales Tax adjustments, normally refunds of Sales Tax amounts after the invoice is updated through the Daily Sales Register, make the adjustments through a Direct Invoice, not, through Cash Receipts as the Cash Receipts Register will not update the Sales Tax Register.
To properly issue an invoice you should have 2 Uninventoried Items set up: 1 that is taxable and 1 that is not taxable. Create an invoice for the customer, make a Document Note or a Memo Line to indicate the purpose of the invoice, i.e. a refund of the sales tax for invoice # 123456, and add the following 2 lines:
1. Line 1
a. Taxable Uninventoried item
b. Quantity -1
c. Price – Merchandise Sale Amount (not the sales tax amount) that is the basis of the adjustment.
 2. Line 2
a. Non-Taxable Uninventoried item
b. Quantity +1
c. Price – Merchandise Sale Amount (not the sales tax amount) that is the basis of the adjustment.
The resulting invoice will be a negative invoice for the amount of the Sales Tax. On the next Sales Tax Register taxable sales will be reduced properly as well as the sales tax liability.
*Joe Riesett is a software consultant with twenty years experience supporting Infor ERP FACTS. if you have questions about this article or would like more information about the modification for Use Tax entry in A/P Non-Invoice Checks, contact Joe at 410.766.6076 x342. |
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